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"I will vigorously fight any of their efforts to force our state's consumers to pay these double charges that serve only to boost the banks' bottom line," said the state's attorney general. by Ann All, editor
March 11, 2002
Although Sen. Alfonse D'Amato (Rep-NY) has withdrawn from the federal ring, the state-level battle over ATM surcharges rages on in Connecticut.
Boston-based Fleet Financial Group leads the charge against state Banking Commissioner John P. Burke and state Attorney General Richard Blumenthal. The latest combatant to join the fray is the federal Office of the Comptroller of the Currency (OCC).
Fleet, along with Charlotte N.C.-based First Union Corp, is challenging Burke's interpretation that says because a state statute allows banks to charge other banks an interchange fee for using their ATMs, it carries an implied prohibition against banks imposing surcharges on consumers. This is the logic behind the case against "double dipping," a term used often by D'Amato.
The banks point out that the statute does not expressly prohibit surcharges or, in fact, even mention the issue of transaction fees being paid by consumers.
Fleet and First Union argue that even if Burke's interpretation is correct, the ban should not apply to them because they are regulated by the National Bank Act, which takes precedence over state regulations.
After nearly two years of litigation, the two banks and Burke were to meet for a Dec. 3 administrative hearing in an attempt to finally resolve their differences. But Blumenthal and lawyers for the bank agreed to postpone the hearing after the OCC intervened, contending it has the authority to allow national banks to impose surcharges.
Arguments on the OCC's request for an injunction against the state Banking Dept. will be heard in U.S. District Court in New Haven on Dec. 22. In the interim, there will be no surcharges because an earlier cease-and-desist order issued by the Banking Dept. is still in effect, preventing banks from assessing the fees.
Blumenthal called the OCC's involvement unwelcome.
"This federal agency is siding with the banks and seeking to impose its will and these unfair fees on Connecticut and its consumers," he said. "I will vigorously fight any of their efforts to force our state's consumers to pay these double charges that serve only to boost the banks' bottom line."
Fleet first filed suit in January 1997 and appeared to gain an initial victory in September 1998 when U.S. District Court Judge Janet B. Arterton ruled that Burke had misinterpreted state law by banning surcharges.
However, Fleet's plans to introduce a $1 surcharge on Oct. 13 were halted when Blumenthal obtained a temporary stay on the fee in the 2nd U.S. Circuit Court of Appeals. That stay was lifted on Oct. 23 and Fleet, along with First Union and BankBoston, introduced a $1 surcharge.
On Nov. 9, Fleet received what spokesman Jim Schepker called "our first big disappointment" when the appeals court ruled that the bank's attempt to strike down Connecticut's ban on surcharges should be settled in state, rather than federal, court.
All three banks complied with a cease and desist order issued by the Banking Dept. and stopped imposing the fee on Nov. 10.
Burke was pleased with the appeals court's ruling. "I have continually been opposed to fighting the case in federal court believing that the surcharge issue is one that impacts Connecticut banking law and should therefore be resolved in state court," he said.
Schepker contends that Fleet's case is strong but is being stymied by procedural issues.
"So far Fleet has been happy with decisions related to the merits of the case. Fleet has not been happy with decisions so far related to matters of procedure," he said.
Fleet sought a temporary injunction against Burke in state Superior Court but was denied when Judge Samuel Teller ruled that Fleet and First Union hadn't demonstrated "irreparable injury" due to the ban.
In his written ruling, Teller noted that Fleet advised ATM users that they they could avoid surcharges by opening accounts with Fleet, a practice that Burke concluded was anti-competitive and could put pressure on consumers to become Fleet customers and leave their smaller banks.
Schepker conceded that Fleet had informed ATM users they could avoid surcharges by opening accounts, but said it was the bank's responsibility to "always offer alternatives to consumers."
Schepker said the primary issue in the case is fair market pricing.
"We believe strongly that fair market pricing raises the quality of a service or product and also lowers the cost of a service or product," he said. "Price controls, on the other hand, lower the quality of a service or product and eventually hold prices higher than they should be."
A lifting of the surcharge ban would create a "new competitive mix" in Connecticut, Schepker said, inviting competition from non-bank ATM deployers and likely resulting in "more ATMs in better locations." It would also allow banks to use the surcharge as a marketing tool, he added.
Schepker said Fleet, Connecticut's largest ATM owner with 352 ATMs in the state, is losing $15,000 a day because of the ban. First Union, with 115 terminals, said it is losing $10,000 a day.
